Why Is Liquidated Damages Clause Important in Construction Contracts

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On Wednesday, December 10, 2014 AudioSolutionz will be hosting a conference on Liquidated Damages, their meaning, purpose and enforceability, led by construction expert Zach Jones. Here are some answers to some pertinent questions related to Liquidated Damages.

The Court’s attitude has always been wary when it comes to contractual Liquidated Damage provisions and the clauses are mostly interpreted against the parties that seek to rely on them. – Zach Jones

Durham, NC (PRWEB)December 01, 2014

It is important know that most of the building contracts include a clause which entitles the client for a specific level of damages, known as ‘Liquidated Damages’ (LDs) or ‘Liquidated and Ascertained Damages’ (LADs) if at all the contractor handles the building after the prescribed date of handing over. LDs may replace the common law right of contractors to damages for late completion with a contractual right to an already-determined amount for the delay period* .

With regards to Liquidated Damages, here are certain points that need attention.

What are the advantages of Liquidated Damages to clients? The amount of LDs is pre-determined already, so the client can avoid calculating and proving the actual loss. It also helps the contractor to concentrate on finishing the project within the stipulated period.

What are the various kinds of LD provisions? Usually LD provisions are expressed as a certain amount which is payable daily, weekly or part-weekly as per the delay in practical completion. There are also kinds of provisions such as a fixed percentage of the contract sum, a lump sum amount or a maximum rate that reduces parts of the project as they become available for use.

What are the advantages that the contractor enjoys? It definitely makes the fixing of contract sum more determined during tender situations, as contractors are allowed to price the LD levels into their tender bid. In cases when the project is late or behind schedule, it is up to the contractors to commercially decide whether to hand over the building late and pay the LDs or devote more resources so that the project is completed on time. Also, the level of LDs that are determined is a ceiling for the amount of damages that need to be paid and if the client’s loss is more than the LDs which are pre-determined and mentioned in the contract, the client is unable to claim the excess amount.

What is the Court’s attitude? The Court’s attitude has always been wary when it comes to contractual LD provisions and the clauses are mostly interpreted against the parties that seek to rely on them. So, there is a continuous case-flow of contractors who are desperate in an attempt to avoid being caught in such clauses by setting up an argument that they constitute a penalty, thus, are unenforceable. However, when the courts interpret such clauses with much strictness, ensuring that the party seeking enforcement from them, have complied with them to the letter – courts don’t interfere unless there is something oppressive in the clause. Unless or until there is something unconscionable in a contract where two parties have mutually agreed to enter, the courts are reluctant to step in.

Join expert speaker Zach Jones in this highly informative conference, ‘Liquidated Damages in Construction Contracts’ on Wednesday, December 10, 2014, organized by AudioSolutionz, the country’s leading industry information provider. Zach will explain the Liquidated Damages Clause, its meaning, purpose and enforceability. Attendees will know why liquidated damages have a valid purpose and that when their purpose is solved, liquidated damages clauses can be usually enforced. Mostly, liquidated damages start or end with nothing but penalties for finishing late. And, when it turns into a penalty, most courts are wary of enforcing it.

This program will talk about:

The valid purpose behind including the provision of liquidated damages in construction contracts

How liquidated damages are viewed by courts

What’s the common test that determines whether it is okay to impose liquidated damages

Variations of the test

Various examples which talk about liquidated damages clause in construction contracts that are analyzed by courts and are found enforceable or otherwise

AudioSolutionz is the country’s leading source of industry information for all housing and construction related webinars and conferences. Being in the industry, you need to be updated about the construction claims, contracting issues, dispute resolutions etc. AudioSolutionz delivers practical and relevant information, which is presented by experts in housing and construction industry, in the form of live conferences and webinars.

We are providing a discount of 10% on the conferences and webinars. To get your discount, use coupon code SAVE10, applicable on all purchases. For further queries, contact us at: Shivane Kay (1-800-223-8720) or e-mail at contact(at)audiosolutionz(dot)com